Nearly half of landlords say the private rental sector is more challenging now than this time last year, pointing to difficulties in growing their portfolios, the obligation to push up rents and energy efficiency improvements.

Research undertaken by Aldermore, which surveyed 500 landlords, found that 48% had been unable to expand their portfolio and two in five said that they’d consider downsizing if market conditions continued.

Of those landlords surveyed, four in 10 said if they were considering growing their portfolio, they would buy as a limited company.

Around two thirds said that if market conditions continued, they would be forced to put up rents by at least 10 per cent in the next year.

Aldermore said that this would add to the financial pressure tenants were facing due to the cost of living crisis.

Recent figures from Zoopla showed that rent as a proportion of earnings for a single earner has reached 35 per cent, the highest for a decade, and this would continue to worsen if rental growth continued to surpass earnings.

However, the report found that some landlords remained optimistic about the sector overall, with 54 per cent optimistic about the future and 66 per cent saying that being a landlord was a good way to make money.

Energy efficiency growing priority for landlords

The report also revealed that for six out of 10 landlords upgrading the energy efficiency of their properties was a priority.

This is partially due to government proposals that rental properties could need to have an Energy Performance Certificate of C or higher. The legislation is not yet law.

Aldermore added that over half were planning to carry out property improvements in the next year to upgrade the energy efficiency of their property portfolio.

Jon Cooper, head of mortgages at Aldermore, said: “2022 was marked by troubling developments to the economy and the property market has faced some significant challenges. With the cost of living crisis already impacting tenants, homeowners and landlords alike, the outlook for 2023 seems tricky to predict.”

He added that there were still “healthy and positive opportunities” for landlords in the UK, pointing to its Buy-to-Let City Tracker released at the end of last year, which showed that Manchester, London and Bristol were the top three cities for buy-to-let investment.

Cooper urged landlords to “work closely with their brokers to assess their portfolios and identify opportunities that lie ahead”.

“At Aldermore, we always want to help people to go for it in life and in business. We’ll continue to offer our broker partners and borrowers the tailored and expert support that they need,” he concluded.